Cord Cutting: The Cable / Satellite TV Industry Is Dying A Slow Death

Photo by Sebastien LE DEROUT

Two weeks ago, our household did what many other households are doing in droves: we cut the cord. Specifically, we cancelled our satellite TV subscription.

The final straw was a notice I received saying DirecTV was going to raise rates at the end of January. I no longer have the notice, but if I recall, it also stated that they would no longer issue refunds for cancelled services. With cable and satellite TV, you pay in advance, so if you cancelled, they used to refund you your unused subscription based on the day you cancelled your service. Now, with DirecTV at least, you no longer can cancel at any time. Well, you can, but your cancellation becomes effective at the end of your billing cycle. This means if you just paid for a month of service and you want to cancel, instead of getting a refund for the rest of the month you aren't going to use, your service won’t be cancelled until the end of the month you paid for and you won’t get any money back.

Exit Cable TV

That notice caused me to re-evaluate my subscription and the industry in general. The no-refund policy is a big “F you” to subscribers.

We rarely watch TV and earlier in 2018, I dropped from DirecTV’s 2nd lowest tier (“Entertainment”) to their lowest (“Select”). Because we have two televisions we were also being charged a $7 second television fee each month. Talk about gratuitous fees! (Back when we were subscribing to Dish Network, we were also charged a monthly “DVR fee.”)  Even at their lowest tier, the price increase in 2019 would push our bill to over $100 each month.

There is no way we watch enough TV to justify that expense. I can’t think of a single television show we watch regularly that isn’t available elsewhere. Most of the shows we watch are on Amazon Prime or Netflix and we rarely watch sports, usually only viewing the Super Bowl or a World Series game or two. The most basic package we could choose from DirecTV gives us 155 channels, of which we watch, at most, 3. It was like throwing money down the drain.

The cable industry knows they have a problem. Bloomberg just published a story about how cable companies are raising their rates to offset losses caused by cable cutters.

Cord cutting is accelerating. According to the Bloomberg story, the third quarter of 2018 saw the largest ever rate of decline in subscribers. So what do the companies do?

Raise rates! Sure! That won’t drive more people away!

Good lord. This is Economics 101. When people stop buying your product, you don’t increase the price!

The companies are blaming the rate increase on increases in costs for carrying local and sports programming. Try getting rid of some of that crap instead!

Guess what? Not everyone wants all those channels. I don’t need 4 varieties of ESPN (or even 1 for that matter), FETV, Enlace, Jewelry Television, or World Harvest Television. I don’t even know what most of those channels are! Why should I have to pay for them? Until I can order channels a la carte, I won’t be going back to cable or satellite.

Enter Streaming

Instead, I’m streaming what I want (and only what I want) from Internet services. That also makes it easier to add and cancel subscriptions as needed.

Amazon Prime Is King

We, like roughly 65% of all American households, are Amazon Prime subscribers. That gives us access to some movies and music programming already. We also subscribe to CBS All Access (for Star Trek: Discovery), Starz (for Outlander), and Amazon Music Unlimited (for greater music options). We just decided to start watching Game of Thrones (yeah, we’re a bit behind the times), so we subscribed to HBO as well. (HBO on DirecTV would be an extra $53.99 per month, although that would include Starz.)

What’s nice is each one of those channels is available through Amazon Prime as a standalone subscription. No additional TV hardware to install. No satellite dish to put on my house. No monthly equipment fees.

Stopping and starting subscriptions is easily done through my Amazon account. My wife only needs Starz when the current season of Outlander is airing. There are about 13 episodes per season and they air once a week, so we subscribe for 13 weeks, then cancel Starz. Same thing with CBS All Access. Star Trek: Discovery had 15 episodes last season. When that season ended, I stopped our subscription.

So What Are We Saving?

Amazon Prime is $119 per year, which translates to $9.90 per month. I would be a Prime subscriber even if no movies were included (indeed, I became a Prime subscriber before the program included any video or music) simply because I order a lot from Amazon and the free shipping is worth it. But let’s go ahead and include the cost of Prime in this comparison.

Our Amazon Music Unlimited plan is the Family plan so all three of us can use it simultaneously. That runs $14.99 per month.

Starz is $8.99 per month (but we only subscribe for 3 months).

CBS All Access (commercial free version) is $9.99 per month. I could save $5 by getting the version that has commercials.

HBO is $14.99 – we’ll cancel this as soon as we are done with Game Of Thrones (the final season should be out by the time we finish the previous seven seasons).

Total monthly cost for all packages: $58.86 per month maximum. Given that we’ll be subscribing to some of these channels for only two or three months a year, the average monthly cost (assuming we keep CBS All Access all year) comes to $40.86. And that doesn't change no matter how many TVs I use to watch.

For DirecTV, the monthly cost with HBO and Starz would be about $160 and I’d be stuck with a 1 or 2 year contract, preventing me from changing programming or cancelling without another charge. And that doesn’t even give us the option to stream music to our TV, phone, or tablet like Amazon Music does.

Is it any wonder people are ditching cable?

What Am I Missing?

I won’t lie. There are some things we are missing. My wife wanted to watch the Golden Globes Red Carpet on E! We had no way to stream that. So for now, we went without. It wasn’t a big deal and those two once yearly events certainly aren’t enough to justify a year-long cable TV subscription. I’m also certain that those events will end up on some streaming service eventually.

We’ll also likely want to watch the Oscars and the Oscars Red Carpet. I don’t know if we’ll be able to stream those, but the main Oscar show will be broadcast over the air, so we can get that for free using an HD television antenna.

Those Damn Millennials!

Although I am not a Millennial, I have to agree with them on this. Add cable and satellite TV to the list of things they are killing.

It's not their fault, really. They were born into a world where the Internet makes just about anything available. I remember years ago, when I was a wee lad and cable TV was just becoming available. Because it was so new, everything was amazing. Most people went from having 12 or so local over-the-air channels to several dozen or even a hundred channels. In those early days, more channels was a huge selling point. It didn't matter if they were channels you never watched. The important thing was you could watch them if you wanted to! One hundred channels was far better than twelve!

And two hundred was better than one hundred! Cable packages started to swell, as providers added more and more stations, which were becoming increasingly more niche and of interest to fewer and fewer viewers.

Then the internet came along and each niche now had its own unlimited, worldwide platform. Sadly, cable companies have never quite grasped this. They continue the arms race of who can provide the most channels. Unfortunately, those channels are not free to cable customers or the cable companies. Someone has to pay for them and the current means of doing so is to spread the cost out over all cable subscribers.

That has now reached a tipping point and cable customers are cancelling in droves. I've joined their ranks.